Post en Sound Money Project comentando sobre la presentación de James Bullard durante la 33rd Cato Monetary Conference.

Last Tuesday, the 33rd annual Cato Monetary Conference was held at the Cato Institute in Washington, DC. There, brilliant minds met and presented on various interesting topics. I will briefly comment on some of them in another post, but for now would like to offer a short reflection on the first keynote address by James Bullard, President and CEO of the Federal Reserve of Bank of St. Louis.

First, Bullard gave two reasons why the FOMC might decide to increase the Federal funds rate target: 1) the unemployment rate might be close to it’s natural (equilibrium) level and 2) the inflation rate is around 1.7% (close to the 2% Fed’s target). Of course, there are still reasons that the Fed might keep the Federal funds rate at the same level. One reason might be the impact of the fall in labor participation on the unemployment rate. A fall in the price of financial assets a few weeks ago might raise the concern that a rise in interest rates may negatively affect the balance sheets of financial institutions. I previously commented on that here. In short while a rise in Federal funds rate target is not unlikely, I wouldn’t be surprised if no changes occur.

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